June 19, 2014 / 6:51 PM / in 5 years

Chinese gold demand seen flat to lower this year -China agency

VANCOUVER, June 19 (Reuters) - Private sector gold demand in China, which last year surpassed India to become the world’s biggest consumer of the yellow metal, will be flat to slightly lower this year, a China Gold Association official said on Thursday.

Demand for gold jewelry in China remains strong but interest in gold bar investments is soft compared with last year because of concerns about further weakness in the gold price, said Xin Song, president of the China Gold Association.

Although gold gained nearly 3 percent on Thursday to rise above $1,310 an ounce on the back of a drop in the dollar, bullion prices are still down 22 percent since the start of last year and a third below their all-time peak in September 2011.

“Demand will be almost the same as last year, or a little bit less ... But for sure it will be over 1,000 tonnes,” said Song, who was in Vancouver for an industry conference.

Chinese gold demand soared 41 percent last year to 1,176 tonnes, according to association figures. But in the first quarter of 2014, the increase in demand slowed to 0.8 percent to 323 tonnes, as a 44 percent slump in bar demand offset a 30 percent rise in jewelry demand. Gold bars are commonly used as either gifts or for investment.

Figures for second-quarter China gold demand will be published next month, Song said.

Robust Chinese demand has helped provide a floor for gold prices, which have been under pressure as a shift in U.S. Federal Reserve policy toward curbing monetary stimulus has reduced the appeal of gold as a safe haven and as gold-backed exchange-traded funds have been hit by big outflows.

China’s rising demand has helped counter a drop in demand in India, where a high current account deficit has forced the government to impose curbs on gold imports. (Editing by Matthew Lewis)

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